HCC-CPL (JV) Vs Union Of India And 9 Ors (Gauhati High Court)
Gauhati High Court held that Petitioner would be entitled to reimbursement of GST on differential amount of price variation of steel and GST paid by the Petitioner from the electronic credit ledger has to be taken into consideration while computing the Price Variation Clause (PVC) Claims of the Petitioner.
Facts- The Petitioner which is a joint venture participated in the tender process for construction of a Single Line BG Tunnel No.12 from CH.105840.00 to 115391.00 at CH.112623 and Adit-2 at 115391 between Tupul — Imphal in connection with a construction of a new railway line project from Jiribam to Tupul. The Petitioner having emerged as a successful tenderer was awarded the contract.
The main issue involved in the present writ petition is reimbursement of the GST on the differential amount of price variation of steel.
Conclusion- The GST legislation is a destination based tax meaning thereby GST is a consumption based tax and would effectively tax the consumer of such goods or services or both at the destination thereof or as the case may be at the point of consumption. The supply of steel by the Petitioner to the Railways makes the Railways the end user and therefore the Railways are required to bear the brunt of the final tax amount upon the supply of steel.
Merely because the Petitioner uses the input tax credit which is credited to his electronic credit ledger for payment of the output tax, which is a permissible mode of payment as per Section 49, it would be completely contrary to the frame work of the GST Act to accept the contention of the Railways that the Petitioner would not be entitled to the reimbursement of the Input Tax Credit which the Petitioner used for payment of the Output Tax Credit.
Held that the Petitioner would be entitled to his PVC claim in terms with the contract and GST paid by the Petitioner from the electronic credit ledger has to be taken into consideration while computing the PVC Claims of the Petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF GAUHATI HIGH COURT
1. Heard Mr. D.Mazumdar, the learned Senior Counsel assisted by Mr. B.D. Deka, the learned counsel for the Petitioner and Mr. G. Goswami, the learned Standing Counsel appearing on behalf of the NF Railway as well as Mr. S.C. Keyal, the learned counsel appearing on behalf of the GST Department.
2. The issue involved in the instant writ petition is as to whether the Petitioner would be entitled to the reimbursement of the GST on the differential amount of price variation on steel.
3. The facts involved in the instant case is that the Petitioner which is a joint venture participated in the tender process for construction of a Single Line BG Tunnel No.12 from CH.105840.00 to 115391.00 at CH.112623 and Adit-2 at 115391 between Tupul — Imphal in connection with a construction of a new railway line project from Jiribam to Tupul. The Petitioner having emerged as a successful tenderer was awarded the contract vide a letter of acceptance issued by the Respondent No. 3 on 20/7/2015 for a total cost of Rs.784,87,54,402.79 (Rupees Seven Hundred Eight-Seven Crores Eighty-Seven Lakhs Fifty-Four Thousand Four Hundred Two and Seventy-Nine paise only). Subsequent to the letter of acceptance, the Petitioner entered into an agreement with the Respondents through the Respondent No.3 on 31/12/2015.
4. From a perusal of the said contract agreement dated 31/12/2015, it reveals that the general conditions of the contract and the specifications of the North East Frontier Railway, 1998 edition corrected up-to-date and the special conditions and special specifications, if any in conformity with the drawings enclosed therewith formed a part of the Agreement.
5. For the purpose of the instant dispute, Clause 46A of the Indian Railway Standard General Conditions of Contract, which is in Chapter IV is relevant. Clause 46A is the Price Variation Clause(PVC). It stipulates that price variation clause shall be applicable only for tenders of value as prescribed by the Ministry of Railways through instructions/Circulars issued from time to time and irrespective of the contract completion period. It was mentioned that the materials supplied free of cost by the Railways to the contractors shall fall outside the purview of the PVC. In terms with the PVC, the base month shall be taken as the month of opening of the tender, including extensions, if any, unless otherwise stated elsewhere. The quarter for applicability of the PVC shall commence from the month following the month of opening of the tender and the price variation shall be based on the average price index of the quarter under consideration. It further reveals from the said Clause in components of various items in the contract wherein variation in price was admissible. Amongst the components of various items, steel was one of such component. The said Clause 46A of the Indian Railway Standard General Conditions of Contract further details out as to how the PVC would be worked out. As the instant writ petition relates to price variation on steel, the formula for working out the price variation so mentioned in Clause 46A.7(vi) which is as under :
Ms=O x (Bs — Bso)
Ms—Amount of Price Variation in steel.
‘Bs’ : SAIL’s (Steel Authority of India Limited) ex-works price plus Excise duty thereof [in rupees per tonne] for the relevant category of the steel supplied by the contractor as prevailing on the first day of the month in which the “steel” was purchased by the contractor (or) as prevailing on the first day of the month in which “steel” was purchased by the contractor or as prevailing on the first day of the month in which “steel” was brought to the site by the contractor, whichever is lower.
‘O’: Weight of steel in tones supplied by the contractor as per the ‘on account’bill for the month under consideration.
‘Bso’ : SAIL’s ex-works price plus Excise duty thereof [in Rs per tonne] for the relevant category of the steel supplied by the contractor as prevailing on the first day of the month in which the tender was opened.”
6. Therefore from the above formula and the definition of Bs and Bso, it would show that the price therein were plus the excise duty. For the sake of convenience, the said formula can be illustrated as under :-
If “O” i.e. the total quantity of steel procured is 1,000
Metric Tonnes;
Bso i.e. the Base Price of Steel is — Rs.100/-;
Bs i.e. the price of steel for the period
under consideration is —- Rs. 120/-
and the rate of applicable excise duty is —- 18%
Then applying the formula as mentioned in Clause 46A.7 (iv) :- i.e.:-
Ms (PVC) = O X (Bs –Bso)
= 1,000 x [( 120+18%) – (100+18%)]
= 1,000 X (141.6-118)
= 1,000 X 23.6
= 23,600/-
7. The above being the formula, there was no difficulty in settling the PVC claims. However, with the Parliament enacting the Central Goods and Service Tax Act, 2017, a confusion arose as to how to apply the PVC w.e.f. 01/07/2017. It reveals that the Respondent No. 9 had issued a Circular dated 5/7/2017. This Circular however was only relevant to those tenders invited on or after 01/07/2017. Be that as it may, there were certain amendments brought into effect to Clause 46A.7 of Clause 46 Part-II of the Indian Railway Standard General Conditions of Contract, July, 2014. In terms with the said amendments, Clause 46A.7 was amended as under :
“46A.7 : Formula :
SQ SAIL’s (Steel Authority of India Limited) ex-works price plus applicable GST and Cess on GST (if any) (in rupees per tonne) for the relevant category of steel supplied by the contractor, as prevailing on the first day of the month in which the steel was purchased by the contractor(or) as prevailing on the first day of the month in which steels was brought to the site by the contractor, whichever is lower.
In case, there is no notification by SAIL for the month under consideration, the price of steel, as notified in the last available month shall be taken.
SB SAIL’s ex-works price plus applicable GST and Cess on GST (if any) thereof (in Rs. per tonne) for the relevant category of steel supplied by the contractor, as prevailing on the first day of the month in which the tender was opened.
In case, there is no notification by SAIL for the month under consideration, the price of steel, as notified in the last available month shall be taken.”
8. As already stated, the said Circular dated 5/7/2017 was not applicable in respect to those tenders which were awarded prior to 01/07/2017, but the reference to the said Circular is only made to understand the action taken by the respondents in respect to those tenders which were awarded post 01/07/2017 and continued after 01/07/2017.
9. It further reveals from the records that the Respondent No. 6 had issued a Joint Procedural Order (JPO) on 16/12/2019. Clause 10 of the said Joint Procedural Order (JPO) relates to price adjustment in steel items. In terms with Clause 10.1 of the said JPO, it was mentioned that as per the GCC-2013 and GCC-2014, ex-works price of steel plus excise duty will be applicable. It was further stipulated that if the base period is before 01/07/2017, excise duty is added in the base price of steel. However, if the “period under consideration is after 01/07/2017 then GST was applicable”. It further stipulated that in such cases, for fair comparison only ex-work price of sale both for the base period and the period under consideration shall be taken for payment of the PVC on steel and in the meantime, the matter may be referred to the Railway Board for The final PVC bill will be paid after getting clarification of the Railway Board. Before delineating on the further developments which had taken place as to how the PVC claim is to be ascertained in respect to those cases similar to the present one, this Court finds it relevant to refer to certain facts involved in the instant case.
10. It is the case of the petitioner herein that in view of the lack of clarity, several PVC bills of the Petitioner were kept pending by the Respondent Railway Authorities. The Petitioner therefore submitted a representation on 23/12/2019 to the Respondent No. 4 ventilating the grievances of such non-payment. Pursuant to the said representation, the Respondent No. 7 herein had issued a notification relating to price variation bills (works contract — evaluation, recording and checking of price variation bills).
11. Clause 11 of the said notification dated 22/5/2020 is pertinent to the present dispute. The said Clause 11 is quoted as herein under :-
“11. Certificate regarding checking of issue of “Excise Duty” in that contract in which “base period” falls in Pre-GST and “period” under consideration “falls in post-GST period”.
For “steel”, it has been mentioned in the PVC clause that, SAIL’s ex-works price plus Excise duty thereof (in rupees per ton) for the relevant category of steel supplied by the contractor, as prevailing on the first day of the month in which the “steel” was purchased by the contractor(or) as prevailing on the first day of the month in which “steel” was brought to the site by the contractor, whichever is lower, shall be taken.
GST implemented w.e.f. 1st July’2017. Under GST, all the central and state taxes are subsumed and a single tax on all commodities. In post-GST period, excise duty does not exist. In pre-GST period, the taxes levied on “Iron and Steel” Excise duty, VAT/CST, Entry tax/octroi/surcharge etc. The rate of excise duty, VAT and CST were normally 12.5%, 5% and 2% respectively in pre-GST period. Thus, total taxes in pre-GST period on “Iron & Steel” were in range of around 18% to 20%. Now, GST rate on “Iron & Steel is 18% . Therefore, it is seen that there is slight reduction in total taxes on “Iron & Steel” due to introduction of GST. However, for working out price variation, rate of “steel” without considering any taxes on pre-GST and post-GST period may be taken for such contracts while evaluation of all PVC bills (excluding final PVC bill) till issue of policy guidelines on this issue.
12. From a perusal of the above quoted Clause 11, it would transpire for working out the price variation, rate of steel without considering any taxes on pre-GST and post-GST period may be taken for such contracts while evaluation of all PVC bills(excluding final PVS bills) till issue of policy guidelines on the issue. Therefore, from the above Clause 11, it would be seen that there was no clarity as to how to work out the PVC claims in respect to payment of the GST amount and as such the direction was specific that the payment of the PVC claim should be made without considering any taxes on the pre-GST and post GST period.
13. The Petitioner being aggrieved by the delay in settling its PVC claims submitted yet another representation on 15/06/2020. As nothing was forthcoming from the Respondent-Railway Authorities, two writ petitions were filed before this Court, which were registered and numbered as W.P. (C)No.2836/2020 and W.P.(C)No.2842/2020. In W.P.(C)No. 2842/2020, the Deputy Chief Engineer/2, Imphal filed an affidavit-in-opposition on behalf of the Respondent Nos. 2 and 4 therein. In the sub-para of Paragraph No. 6 of the said affidavit-in-opposition, it was mentioned that since the matter of GST on steel after 01/07/2017 needed some clarification from the Railway Board, the matter was referred to the Railway Board. It was further mentioned that at present only the ex-work price of sale both for “base period” and the “period under consideration” shall be taken up for payment. The final PVC bill would be paid after getting clarification of the Railway Board. It further reveals from the records that in view of the said specific stand, as the Petitioner was in urgent need of money, the Petitioner submitted the PVC bills without including the GST components on the premise that the reimbursement of the GST would be done only after the clarifications are issued by the Railway Board. Accordingly, pursuant to the submission of the said PVC bills without including the GST components, the Petitioner’s PVS bills were cleared on 14/9/2020 and 23/10/2020. Under such circumstances, the Petitioner withdrew both the writ petitions i.e. W.P.(C) No. 2836/2020 and W.P.(C) No.2842/2020 with a liberty to file a fresh writ petition on 31/3/2021 in view of the pendency of the claim relating to the GST component. It is under such circumstances that the instant writ petition was filed claiming the reimbursement of the GST on the differential amount of price variation of steel. In the instant writ petition, the Petitioner has also assailed the Joint Procedural Order dated 16/12/2019 and the Notification dated 22/5/2020 on the ground that the said Joint Procedural Order dated 16/12/2019 as well as the Notification dated 22/5/2020 have withheld the entitlement of the Petitioner in respect to the GST component till final clarifications are issued by the Board.
14. The record reveals that an affidavit-in-opposition was filed by the Respondent No. 7 on 19th of August,2021. A perusal of the said affidavit-in opposition reveals that the PVC claims of the Petitioner were paid by the Railway Authorities without considering any taxes on the pre-GST and post-GST period. It was mentioned in the affidavit-in-opposition that the JPO dated 16/12/2019 and the Notification dated 22/5/2020 did not supersede the provisions of the GCC clause but without getting the clarifications from the Railway Board, it was difficult for which the Respondent NF Railway had written letters dated 19/6/2020 and 7/1/2021 relating to payment of price variation in works contract. The Railway Board gave a clarification vide its letter bearing No. 2020/CE-I/CT/10E/CG/GCC Policy dated 24/2/2021. The clarification so given insofar as PVC on steel in the Communication dated 24/2/2021 being relevant is quoted herein under :-
